Mandates currently in place provide the when and where of a 60 billion gallons (and up) biofuels market by 2022 – but can the capacity be built?
In Florida, the Digest today releases its annual review of biofuels mandates and targets around the world, looking at the state of biofuels mandates in 52 countries around the world.
The bulk of mandates comes from the EU-27, where the Renewable Energy Directive (RED) specifies a 10 percent renewables content by 2020 across the entire membership – though 7 percent of that will come from biofuels, the balance from the electrification of the fleet. The other 21 countries are primarily in Asia.
Besides the EU, the major blending mandates that will drive global demand are those set in the US, China and Brazil – each of which has set targets – or, in the case of Brazil, is already there – at levels in the 15-20 percent range by 2020-2022. India’s fast-growing economy also has a 20 percent ethanol mandate in place for 2017, but the country has a shaky record of implementing mandates, so far.
In today’s report, we look at the country-by-country situation where there is recent action affecting mandates.
The major biofuels mandates – with some estimates of 2020 consumption, translate into the major drivers of the 60 billion gallons of global biofuels demand that are widely discussed, without addressing the demand for aviation, or the mandates in place in countries such as Canada, Australia, or throughout Southeast Asia.
|2022 fuel demand||Biofuels demand|
(note: the figures above are intended to be illustrative, rather than definitive forward-looking projections of fuel demand, which will depend on price, availability and GDP growth in the countries and geographies cited)
Risk factors: Construction of capacity. In the US, somewhere between 300 and 600 bio-refineries are required to meet mandates – another 300 in China. Overall, 35 billion gallons in new capacity, or more, is going to be required by 2022 to meet these mandates – most of it requiring cellulosic feedstocks or other advanced biofuels. That’s easily 1,000 refineries.
Mandates in the Americas
Has a B7 biodiesel mandate in place – increased last year from B5 – and is mulling moves to increase this to at least B10 by 2015. Also has an E5 ethanol mandate in place.
Mandates a minimum ethanol content of 18-20 percent – reduced from 25 percent last year when ethanol supplies tightened on rising global prices for sugar. Also has a B2 biodiesel mandate, scheduled to increase to B5 in 2013
Canada has a Renewable Fuel Standard featuring E5 ethanol, and B2 biodiesel. Canada introduced the 2 percent biodiesel mandate as of July 1, and he Canadian Renewable Fuels Association and the Canadian Truckers Alliance are locked in a tit-for-tat debate over it. The CTA is claiming that the mandate will push diesel prices higher and that biodiesel is bad for some engines. On the other hand, the CRFA claims price increases would be unnoticeable over a 25-year period and that engines have shown better performance under state testing than with fossil diesel. Four provinces have individual provincial mandates, up to E8.5.
Also, the national government released its final regulations for its 5 percent ethanol mandate. The Canadian Renewable Fuels Association said that an assessment conducted by econometric firm Doyletech Corporation concluded that, “the grand total of the annual positive economic impact of renewable fuels is $2.013 billion.”
Has an E8 ethanol mandate in place since 2008, with discussions underway to increase the mandate to 10 percent.
Has an E5 ethanol and B5 biodiesel target in place, no mandates.
Has an E7 ethanol and B20 biodiesel mandate in place.
Has an E10 ethanol mandate that took effect last year.
Has an E2 ethanol mandate in place in Guadalajara, and will expand the blending mandate next year (2012) to Mexico City and Monterrey.
In Panama, the country is preparing to introduce an ethanol mandate beginning with 2% in April 2013, rising to 5% from April 2014, hitting 7% in April 2015 and reaching 10% by April 2016.
Has an E24 ethanol mandate and a B1 biodiesel mandate in place.
Has an E7.8 ethanol, and B2 biodiesel mandate in place. Expected to move towards B5 biodiesel this year.
Has a B2 biodiesel mandate in place, expected to move to E5 ethanol in 2015 and B5 biodiesel in 2012.
The EPA proposes to mandate the blending of 15.2 billion gallons of renewable fuel into the US fuel supply in 2012, and increased the proposed mandate for advanced biofuels by 48 percent, to 2 billion gallons. The agency recently released its proposal for 2012 requirements under the Renewable Fuel Standard:
Biomass-based diesel (1.0 billion gallons; 0.91 percent)
Advanced biofuels (2.0 billion gallons; 1.21 percent)
Cellulosic biofuels (3.45 – 12.9 million gallons; 0.002 – 0.010 percent)
Total renewable fuels (15.2 billion gallons; 9.21 percent)
Overall, the US is moving towards a 36 billion gallon biofuels target by 2022.
Mandates in the EU
The EU currently has a 5.75 percent mandate directive in place, and will move to 10 percent by 2020, but 30 percent of the target would be met by electric cars or trains, with the remainder to come from biofuels.
The EU also said it would develop regulations to limit the impact of indirect land-use change, while biofuels developed from non-food sources will receive preferred treatment under the agreement – and this week approved seven sustainability standards designed towards that end.
The RED requires the EU to have:
• A 20 percent reduction in green house gas (GHG) emissions by 2020 compared to 1990.
• A 20 percent improvement in energy efficiency compared to forecasts for 2020.
• A 20 percent share for renewable energy in the EU total energy mix. Part of this 20 percent
share is a 10 percent minimum target for renewable energy consumed in transport to be achieved by all (MS).
The goal for 20 percent renewable energy in total energy consumption is an overall EU goal. The RED sets different targets for different MS within this overall target. This means that some MS will have to reach much higher targets than the 20 percent renewable energy by 2020, whereas other MS will have much lower targets.
Mandates in Asia-Pac
The states of Queensland and New South Wales have ethanol blending mandates, set at five percent in Queensland, and 4 percent in New South Wales. New South Wales also has a B2 biodiesel mandate in place. The Queensland mandate will take effect in Fall 2011, delayed after opposition from boat owners who had formed the Against Ethanol Mandates Alliance.
Overall, the country seeks to move to a 10 percent biofuels mandate by 2020, and currently has a 15 percent overall target for 2020. Nine Chinese provinces have required 10% ethanol blends to date, including – Heilongjian, Jilin, Liaoning, Anhui, and Henan.
This week, the government has recently approved a voluntary blend of 5% biodiesel and 10% ethanol with an eye on a mandate within the next 12 months. Oil companies are pulling out of the country because they’re finding that supplying islands so far from oil sources isn’t profitable.
Sugar mills say they will produce 2.7 billion liters of ethanol next year, more than enough to supply ethanol for the current E5 program but also for chemical and other industrial use. The country’s total demand for ethanol next year is seen at 2.2 billion liters, with 1 billion liters expected for E5. India is scheduled to move to E10 as soon as production is in place, and ultimately has set a goal of 20 percent for all biofuels content by 2017 – it is highly doubtful that they will reach the target.
An on-and-off 2.5 percent biodiesel mandate, and an E3 ethanol mandate.
The country’s B5 blending mandate kicked off in June. The program begins in Putrajaya and will be phased in over time throughout the rest of the country. Biodiesel will be price controlled while the government has recently removed the subsidy on fossil diesel.
The national government said it may scrap a $36 million biofuels subsidy program because, with only $700,000 paid out in tax credits, it is concerned that biofuels are uneconomic, according to Hekia Parata, the New Zealand energy minister. However, Gull New Zealand manager, Dave Bodger, said that there was public interest in biofuels, noting 250,000 liters sold last December. The government previously had moved away from a biofuels mandate in 2008 and instead offered tax credits on biofuels that lower the price of the fuels.
The National Biofuels Board regulators are going ahead with the E-10, or 10% ethanol blend mandate, but are allowing ethanol producers and oil companies 6 months. The Philippine DOE is expected to release a circular, stating that the E-10 blend will be mandatory effective July 16th, and that for the following four years, ethanol may be imported, but after July 2015, imports will be allowed only to make up for shortfalls in local production. Current ethanol production in the Philippines is about 80 million liters per year, but to meet the 5% blend, an estimated 200 million liters is required. Rosemarie S. Gomera, Sugar Regulatory Administration planning department has stated that the thought is that if the blend is raised, more investors would be encouraged to build more ethanol plants.
Currently has a B2 biodiesel mandate in place. This year’s introduction of a B2.5 biodiesel mandate is expected to boost demand for imported Malaysian palm oil for use as fuel. Malaysian palm oil imports accounted for 32.2% of South Korea’s oil imports during 2010. Palm oil is beginning to make in-roads in the Korean market for cooking as well.
Has a B1 biodiesel mandate in place since 2008.
The energy ministry raised the mandatory biodiesel blend to 3% in April from the current 2% based on an increased supply of crude palm oil available. The increased demand from the blending policy would require an additional 40,000 metric tons of CPO per day.
In Vietnam, Japan’s Itochu will invest an undisclosed amount in PetroVietnam’s ethanol production program. The cassava-based ethanol facility will produce 100,000 kiloliters of ethanol annually beginning in the spring of 2012. PetroVietnam’s oil division will be in charge of marketing the ethanol for local consumption under the country’s E5 blending mandate.
Mandates in Africa
The Metehara sugar factory is now producing ethanol, which will bring the country’s ethanol production up to 18.5 million liters per year. The extra domestic supply will allow the capital city of Addis Ababa to boost its blending to 10% on March 7 from the current 5% blend. Doing so also breaks the monopoly on ethanol-blended fuel currently held by Sudan’s Nile Petroleum, as OilLibya will begin blending E10 as well.
Has an E10 mandate in place in Kisumu, the country’s third largest city.
Has an E10 ethanol mandate in place, but depends on availability.
A policy mandating the blending of both ethanol and biodiesel has been sent to the President’s Cabinet for approval that includes both blend levels and deadlines for implementation. Brazil’s FGV Projetos is undergoing a sustainability feasibility study for the government with funding from Brazil’s Vale mining company under a partnership with the European Union.
Has an E10 ethanol target in place, no mandate.
Backed away from implementing (to date) an E8 ethanol mandate and B2 biodiesel mandate, both approved originally in 2007, for 2013.